Sunday, June 24, 2012

We can't pay, says Central Bank of Belize.

We can’t pay, GOB tells creditors

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Posted: 22/06/2012 - 09:39 AM
Author: Adele Ramos

The Government of Belize is in a two-billion-dollar debt predication—that is according to the report, Belize 2012 – Economic and Financial Update, released on the website of the Central Bank of Belize today, Wednesday, June 20.
“The Government’s latest projections indicate that the country is facing sizeable financing gaps from 2013 onwards; the authorities are in active discussions with multilateral partners, but it is clear that multilateral funds alone will not close these expected shortfalls,” said the report.
The debt review had been commissioned by Prime Minister and Minister of Finance Dean Barrow soon after his return to office in March, when he put together a team led by former Minister of Economic Development Mark Espat, to undertake a comprehensive debt review—a review which now makes the point that the country cannot afford its existing debts, and it is now trying to find a sustainable way forward.
The document sets out a profile of exactly what Belize owes, and the debts include nearly half-a-billion dollars ($456.5 million) to the Michael Ashcroft group. Estimated compensation to the former owners of the Belize Telemedia Limited and the Belize Electricity Limited are together estimated at BZ$540 million.
The gloomy news is about the proceeds of oil exploration, which the report said peaked in 2009, and continues to decline with no immediate prospect of a boost in revenues. The report makes the point that, “ new commercially-viable oil finds have been made in Belize since 2005 – contrary to the hopes of Belize and its creditors at the time of the 2007 restructuring.”
On top of the expected claims for BTL and BEL, Government has listed $47 million in debts to NEWCO, a $4 million arbitration award won over an airport concession cancelled under the Musa administration, as well as $43 million for land claims.
There is BZ$116.5 million in awards to the Ashcroft group, which the Barrow administration continues to resist. They are (1) the 2009 London Court of International Arbitration (LCIA) award for BZ$43.8 million (plus accrued interest) for BCB Holdings and the Belize Bank; (2) BZ$33.5 million (plus accrued interest) for the Belize Bank; and (3) a 2009 LCIA arbitration award for BZ$39.2 million (plus accrued interest), which has been assigned by the former BTL shareholders to the Belize Social Development Ltd (BSDL).
Belize’s overall direct public debt is listed at US$1.182 billion, with US$554 million of that being external commercial debt, essentially the super bond. This is the portion that the Barrow administration is now attempting to renegotiate.
“Belize is now moving to address its additional liabilities and determine appropriate strategies for dealing with the forecast collapse in oil revenue; this notwithstanding, overall obligations look certain to exceed the country’s capacity to pay, even when conservative assumptions are used,” said the report.
We understand that with the conclusion of the review, the Government team will next move into negotiations with creditors and bondholders who had subscribed to the super bond, through which the national commercial debt was largely restructured back in 2007.
Among those who the government would engage is the Committee of Creditors, recently formed by a group of foreign bondholders to protect their interests in the negotiations.
According to the debt review, the critical year seems to be 2013, when the budget deficit would record huge and unsustainable spreads of nearly 8%.
“The Government is facing sizeable financing gaps from 2013 onwards; using the Mid-Point for the nationalization compensation amounts that the Government must pay, these gaps reach 8.0% of GDP in 2014 and decline gradually to reach 7.3% of GDP in 2017,” said the report.

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